On March 9, 2015, the United States Supreme Court issued a significant decision impacting employers who are concerned with whether or not their workers can be classified as exempt employees under the Fair Labor Standards Act. The decision in Perez v. Mortgage Bankers Assn. confirmed that the DOL had the ability to interpret its rules to determine that mortgage lenders were non-exempt employees. As such, mortgage lenders need to be paid overtime for every hour worked over forty per week.
However, the impact of the decision extends far beyond the mortgage banking industry. Perez dealt with the much broader issue of whether the DOL needed to undergo a new notice and comment period before changing its prior interpretation of an administrative rule. In both 1990 and 2001, the DOL had issued letters determining that mortgage loan officers do not qualify for the administrative exemption to overtime pay requirements. In 2004, however, the DOL issued new regulations regarding the administrative exemption. Subsequently, the DOL considered the revised regulations and determined that mortgage loan officers did meet the exemption and did not need to be paid overtime. However, in 2010, the DOL once again changed its position, withdrew its prior decision, and purported to determine that mortgage loan officers do not qualify for the exemption.
Before the U.S. Supreme Court, the Mortgage Bankers Association argued that the DOL should not have been able to change its prior interpretation of its rules without undergoing a notice and comment period. Such a notice and comment period is necessary when an administrative agency engages in legislative rule making and appeared consistent with the Court of Appeals for the District of Columbia’s decision in Paralyzed Veterans of America v. D.C. Arena, L.P.
Writing for the Court, Justice Sotomayor stated that the Paralyzed Veterans decision was contrary to the Administrative Procedure Act, and rejected arguments that such rule changes were against public policy. The Court further determined that the issue of whether the rule change at issue was really legislative rather than interpretive in nature had been waived by the parties. The decision makes it easier for administrative agencies to change their prior interpretations of rules. An example of when this is likely to occur is when control of the agency itself changes, such as following the election of a new President.
On March 9, 2015, the United States Supreme Court issued a significant decision impacting employers who are concerned with whether or not their workers can be classified as exempt employees under the Fair Labor Standards Act. The decision in Perez v. Mortgage Bankers Assn. confirmed that the DOL had the ability to interpret its rules to determine that mortgage lenders were non-exempt employees. As such, mortgage lenders need to be paid overtime for every hour worked over forty per week.
However, the impact of the decision extends far beyond the mortgage banking industry. Perez dealt with the much broader issue of whether the DOL needed to undergo a new notice and comment period before changing its prior interpretation of an administrative rule. In both 1990 and 2001, the DOL had issued letters determining that mortgage loan officers do not qualify for the administrative exemption to overtime pay requirements. In 2004, however, the DOL issued new regulations regarding the administrative exemption. Subsequently, the DOL considered the revised regulations and determined that mortgage loan officers did meet the exemption and did not need to be paid overtime. However, in 2010, the DOL once again changed its position, withdrew its prior decision, and purported to determine that mortgage loan officers do not qualify for the exemption.
Before the U.S. Supreme Court, the Mortgage Bankers Association argued that the DOL should not have been able to change its prior interpretation of its rules without undergoing a notice and comment period. Such a notice and comment period is necessary when an administrative agency engages in legislative rule making and appeared consistent with the Court of Appeals for the District of Columbia’s decision in Paralyzed Veterans of America v. D.C. Arena, L.P.
Writing for the Court, Justice Sotomayor stated that the Paralyzed Veterans decision was contrary to the Administrative Procedure Act, and rejected arguments that such rule changes were against public policy. The Court further determined that the issue of whether the rule change at issue was really legislative rather than interpretive in nature had been waived by the parties. The decision makes it easier for administrative agencies to change their prior interpretations of rules. An example of when this is likely to occur is when control of the agency itself changes, such as following the election of a new President.
By: David P. Pierce.
